Governor of the Australia Central Bank Says Again That Rate Cuts Are Too Soon

Michele Bullock, Australia’s top central banker, said again on Thursday that it is too early to think about lowering interest rates in the near future because inflation is still very high. The Governor of the Reserve Bank of Australia (RBA) said in Sydney that bringing inflation back to the goal range of 2% to 3% is still the bank’s top concern.

Bullock said that even though new figures show that the economy is slowing down, inflationary pressures are still too high to support lowering interest rates. “If the economy develops broadly as expected, the board does not expect that it will be able to cut rates in the near term,” Bullock said, indicating that the bank would not be cutting rates any time soon.

This tough talk comes after a report showed that Australia’s economy barely grew in the second quarter, with weak family spending being a main cause. A monthly report on consumer prices also showed that overall inflation had dropped to 3.5% in July. Inflation is still above goal, though, because of things in the United States, like housing and market services. It won’t be until late 2025 that core inflation falls into the goal range.

Bullock agreed that the RBA’s core predictions were hard to predict, but she said that the board would change how it did things as needed. “If people start to expect high inflation, the RBA would have to slow the economy even more to get it under control,” she said.

The RBA has kept interest rates at 4.35% since November because they think this level is tight enough to stop inflation without hurting job growth. Bullock said that keeping inflation in the goal range is very important for getting long-term full employment.

The market is still guessing, even though Bullock has been cautious. There is a 42% chance that the RBA will cut rates in November, especially if the U.S. Federal Reserve eases its policy this month. A rate cut by the RBA in December is also pretty much a given.

Bullock also said that while prices for retail goods are getting close to historical means, rent prices and labour costs are still rising quickly because wages are going up and efficiency is low.